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Selling To Many Cultures–Within The U.S.
Frank V. Cespedes and Michael Wong 11.24.10, 1:10 PM ET

 International markets have become increasingly important for many U.S. companies, and they are the assumed priority for future growth. Wal-Mart Stores is representative: In 1998 it obtained 6% of its revenue internationally; by 2008, international revenues constituted 25% of Wal-Mart’s much larger sales base. No growth-minded executive should argue against such initiatives.

 But while many companies have plans to penetrate emerging markets like the so-called BRIC nations (Brazil, Russia, India and China), too many continue to overlook enormous opportunities within the U.S.–such as growing ethnic markets. The combined African-American and Hispanic market in the U.S. is larger than the economies of all but 13 countries; more than 2 million people in the U.S. speak Chinese. White people, 67% of the U.S. population in 2005, will represent less than half of the population (47%) by 2050, while Latinos will be nearly 30%, Blacks 13% and Asians 9%. What ‘s more, a 2009 Pew Research Center study indicated that one in five Americans will be immigrants in 2050 (vs. 1 in 8 in 2005), thanks to a foreign-born population that is growing at almost three times the rate of the overall U.S. population.

 Companies must go beyond gross demographic data in order to craft effective strategies for marketing to specific ethnic groups. What languages other than English do these customers speak? What are the countries of origin of different Asian or Hispanic groups, and what are the implications for your website, product literature, retail locations and other marketing variables?

 Rewards for this type of analysis can be significant. After rethinking its initiatives, PepsiCo found profit opportunities in taking a sophisticated multicultural approach to its home market and existing product line. Targeted winners in the U.S. include guacamole-flavored Doritos chips and Gatorade Xtremo, both aimed at Hispanic Americans, as well as Mountain Dew Code Red, targeted to African-Americans. In 2009 PepsiCo continued this approach when it launched a marketing promotion related to the Diwali holiday in New Jersey, a state with a large and concentrated population of Asian-Indians.

 Discovering opportunities such as these requires truly segmenting, not just partitioning, ethnic markets. Using only U.S. Census data is an example of partitioning a market. It reveals little about–and often obscures–important differences between various groups, such as Asian-Indian Americans and Asian-Pakistani Americans. Ironically, an executive posted to the Asian subcontinent would receive training about these differences, but many companies neglect to provide this same instruction in the U.S. In contrast, segmenting a market starts from understanding distinct values and buying behaviors.

 In approaching ethnic markets, too many companies are persuaded by external parties with incentives of their own to recommend broad, national campaigns and the budgets that accompany them. The danger is that national campaigns based on general demographic data dilute resources and the ability to address differences in purchasing behavior within ethnic categories. More focused regional launches drive learning and are easier to test for quantifiable returns. For instance, nearly 40% of Asian-Americans reside in the Los Angeles, San Francisco, New York and Chicago areas. Why invest nationally when four metropolitan areas can offer a very meaningful initial market?

 Similarly, Asian-Indian Americans constitute a far larger percentage of U.S. health care professionals than of the country ‘s overall population, as some pharmaceutical companies discovered when they focused on the approximately 50,000 physicians who belong to the American Association of Physicians of Indian Origin.

 Another challenge is the need for better dialogue among corporate decision makers. Here, companies must overcome self-imposed barriers. Within large companies, so-called political correctness often dominates discussion of ethnic and racial groups. Fearful of being perceived as stereotyping, managers from outside an ethnic group often shy away from any generalization about those customers.

 There are also untapped assets within many companies. Employee network groups are a frequently overlooked source of information about the purchasing preferences of target groups. And employees who have lived in both the U.S. and a country that has supplied a sizable number of recent immigrants to the U.S. can be important conduits for dialogue.

 With the growth of China, India and other economies, U.S. companies should be investing overseas. But they should also broaden their understanding of marketing within the U.S. itself.

 This article is adapted from “Selling to Many Cultures–Within the U.S.,” by Frank V. Cespedes and Michael Wong, which appeared in the Fall 2010 issue of MIT Sloan Management Review. Copyright (c) Massachusetts Institute of Technology, 2010. All rights reserved.

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